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The practice of people trying to swindle one another has been around for thousands of years. From insurance fraud to mail and email scams to investment scams, fraudsters continue to devise schemes (some old, some new) to trick unsuspecting individuals and businesses into divulging sensitive information and their hard-earned money.
Let’s look at a few scams, how they have evolved with new trends and technological advances, and the tools and resources consumers can leverage to help prevent them from becoming victims.
Earliest Known Insurance Scam
When we said fraud and scams had been around for thousands of years, we weren’t kidding. The earliest recorded case of fraud occurred in 300 BC. A Greek sea merchant, Hegestratos, took out an insurance policy, known as a bottomry, on his ship and cargo. A bottomry allowed merchants to borrow money with the agreement to pay it back with interest once they delivered their cargo. If the loan went unpaid, the merchant’s ship and cargo would be repossessed. Well, Hegestratos took out the loan but sank his empty ship to pocket all the loaned money. Ultimately though, his plan backfired. The sea merchant was caught in the act of sinking his ship and was chased off the ship, causing him to drown as he attempted to escape.
Hegestratos’ attempt set a precedent for many insurance scams today.
Snake Oil & the Rattlesnake King
According to Wikipedia, “snake oil” is a term used to describe deceptive marketing, healthcare fraud, or a scam. Similarly, “snake oil salesman” is a common label that describes someone who sells, promotes, or is a general proponent of some valueless or fraudulent cure, remedy, or solution. But how was the term first coined?
During the 1800s, over 100,000 Chinese immigrants came to the United States to build the Transcontinental Railroad. With them, they brought their families, cultures, and even their medicines, including real snake oil. Real snake oil comes from the Chinese water snake, rich in Omega-3 acids, which help with arthritis and other joint and muscle pain. Seizing on the rising popularity of the product, a man named Clark Stanley, who called himself the “Rattlesnake King,” traveled across the U.S., putting on shows where he would slice open a live rattlesnake, boil it in water, and package and sell the oil to onlookers. The problem? The snakes the Rattlesnake King used were not Chinese water snakes; therefore, the “miracle product” Stanley sold was a scam.
Stanley’s concoction was eventually tested in 1917 by the U.S. government, in which they found that “Stanley’s Snake Oil” was a combination of mineral and fatty oils with a few additives – not the miracle cure he was promising his customers. While scammers typically avoid calling their cure-all products “snake oil” – well, not all – there are many instances of this popular scam still happening today. From Coronavirus treatments and vaccines to blood testing scams, consumers should beware of anyone claiming a cure-all product or miracle technology until the product in question has been fully vetted and tested.
(E)Mail, a Spanish Prisoner, & a Nigerian Prince
Most people today are likely familiar with the 419 scam or, its more commonly known name, the “Nigerian Prince” scam. However, this scam dates back to the early 19th century, known then as the “Spanish Prisoner.”
In the Spanish Prisoner scam, the trickster corresponds via mail with his victims, deceiving them into believing he is a wealthy person who has been wrongfully imprisoned; however, he’s reaching out to a friend (the unsuspecting victim) to urgently help raise money for his release. The fraudster asks the victim to quickly deliver the requested funds with the promise of an even bigger monetary reward given to the victim upon the prisoner’s release. This scam, also called an “advance fee scam,” proved successful and has been used in a plethora of scam solicitations throughout history, particularly with the creation and boom of the Internet.
In more recent history, fraudsters turned to the growing popularity of email instead of sending these fake, urgent requests for financial support via snail mail. The Nigerian Prince scam, most heavily sent via email, uses similar tactics of the Spanish Prisoner, with claims that they or a close friend is a member of royalty and urgently needs financial help to flee the country or be released from their unlawful imprisonment. However, in the Nigerian Prince scam, the fraudster is not only attempting to steal the reader’s money; they are also seeking to fraudulently obtain their personally identifiable information (PII) to further commit identity fraud. While the Nigerian Prince scam has been seen as more of a punchline to a joke in recent decades, Americans lost $703,000 in 2018 from this con alone, illustrating the importance of thinking twice before sending money or sharing your PII with anyone you’re not familiar with.
Investment Scams, Cryptocurrency, & Social Media
A Ponzi scheme, or a pyramid scheme, is a fraudulent investing scam that “involves paying existing investors in a nonexistent enterprise with the funds collected from new investors.” These schemes inevitably fail, as the scam relies on a steady flow of new investors; otherwise, there won’t be enough money to go around.
Ponzi schemes were named after Charles Ponzi, who made $15 million in 1920 from his pyramid scheme. Many of us may also know about a more recent Ponzi scheme that was run by Bernie Madoff, an American financier who defrauded thousands of investors out of billions of dollars over the course of roughly 17 years.
With the advances in technology and other forms of currency, including digital currency, investors today are seeing a rise in investment scams, bitcoin investment scams, and cryptocurrency scams.
In bitcoin investment schemes, scammers contact would-be investors claiming to be investment managers who made millions by investing in cryptocurrency. And guess what? They want to help other investors do the same! Isn’t that nice?? But wait, the scammer needs the would-be investor to send an upfront fee and their PII under the guise that it’s for transferring or depositing the funds. Cryptocurrency, like bitcoin, leverages blockchain for verification and isn’t managed by financial institutions, making it highly susceptible to theft and fraud. In 2018, a popular Twitter user’s account got hacked, sending tweets with claims of a cryptocurrency investment opportunity. However, users quickly discovered that the “opportunity” didn’t really exist.
These investment scams are frequently seen on social media, which has its fair share of scams and scammers – no, not just Joanne the Scammer. Social media scams typically involve scammers creating fake profiles to befriend or follow unsuspecting people, sending them spam or links to malicious websites or sites designed to steal their PII. Consumers should stay on watch for those “too good to be true” or “get rich quick” offers AND be mindful of friend requests from unfamiliar users before mistakenly sharing personal information or sending any money.
Comprehensive Scam Prevention Resources
Innumerable scams have made their way to innocent consumers’ inboxes, mailboxes, DMs, and screens. It’s time for businesses to help protect individuals – and their brand – from damages caused by scams and offer consumers a preventative and comprehensive service to help them avoid becoming a victim.
Let ScamAssist® help.
With ScamAssist, customers can submit suspicious scams for expert review. This unique online service utilizes a combination of Iris’ certified Resolution Specialists (real people) and proprietary scoring methodology (cool technology). Customers will then receive a professional assessment of the legitimacy of the message along with personalized recommendations for next steps. These are the types of suspicious messages we’ll review:
- Website or web links/URLs
- Flyers or direct mail
- Phone calls or voicemails
- Text messages
Interested in trying ScamAssist – for FREE – before offering it to your customers?